Book Early or Book Late?

February 16, 2010

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It’s a dilemma that many of us have faced when planning our summer getaway. In order to secure the best possible price for your hotel, should you book early, or wait and take a chance on a last minute booking?

There are no easy answers to this question of course, and the answer can often simply be ‘it depends’. However, you can make savings, but first you need to have some understanding of how the industry works.

Explaining how the industry works is in itself a challenge, and the can of worms I’ve just opened are now busily wriggling all over my keyboard. Nevertheless, I’ll give it a go, and to make the task easier we’ll create ourselves a scenario.

The scenario is this. You are planning a summer family getaway for two weeks in July this year (if you’re in the southern hemisphere I trust you’ll make the necessary date adjustments); so, do you book now, wait until six weeks or so ahead of arrival or wait until the very last minute?

Hotels have various contractual arrangements with travel agencies and tour operators. There are guarantee contracts; whereby a tour company will effectively reserve a specified number of rooms for a specified period of time and will pay for those rooms regardless of whether they fill them or not. In these circumstances, the room rates are usually quite low and the tour operator has a great deal of room for movement as far as price is concerned.

Put simply, if a package tour operator has five rooms unsold in a hotel and they also have sufficient seats on the aircraft, then it automatically follows that as the date approaches they will reduce the cost in order that they simply fill a room that they are obliged to pay for anyway. This is your classic ‘late deal’, travel companies selling holidays at a loss because they would lose even more by not selling them at all.

So, if you like your holidays all nicely packaged up, then there is a lot to be said for booking late; you’re almost certain to pick up a bargain holiday somewhere, providing of course you’re not too fussy about where you actually end up.

The problem of course is that package holiday companies are disappearing at an alarming rate, there are not many left in truth and thus the amount of choice and potential for late deals continues to diminish. Not only that, travel with a package tour company these days and there is no guarantee it will exist by the time you come back. A situation best avoided.

The internet killed package tour companies. People like their pick’n’mix holidays, and are quite happy to book their hotel, flights and transfers independently; and bundling together those elements into a neat package and throwing in a rep for good measure was just about all these companies ever did.

So now we have ‘release contracts’ or often no contract at all (we’ll get onto that later). A release contract is simply an arrangement between a hotel and booking agency that specifies the price at which rooms are sold to the agency. There is no ‘guarantee’ and agencies only pay for the rooms that they sell. The prices are fixed and the agency are then free to mark-up the price of the rooms and sell them on to you the customer.

However, such is the enormous amount of competition online, booking agencies will rarely mark-up the price of a room by more than 10% above the price they paid for it, and often it is substantially less than that. I have seen an occasion where a well established agency made just 8€ from a booking with a total value of 1800€.

The overall effect of this is that companies have very little room to play with prices and hence they will constantly canvass hotels for special discounts or preferential rates in order to set them apart from the competition; a policy that often succeeds as our price comparison service proves.

How all this relates to the question of when to book is difficult to say. While the maximum price is stipulated in the contract, prices can be brought down by the hotels, and often are if they see that bookings for a particular week are slow, and they may issue this offer anything up to three months ahead of the week in question, and on occasion will withdraw it again should reservations pick up.

What it is true to say is that (using our July holiday scenario) during the late autumn and early part of the winter rooms will be sold at the contracted rates, but usually less a 10% early booking discount. This is standard practice, where in the case of a hotel that opens from May to October, any bookings received up to the end of April are subject to a 10% discount. That travel companies choose to pass that on to the customer is not guaranteed, however one suspects that in order to compete they have no choice.

Booking long in advance can therefore save you money, but by committing early you run the risk of missing out on any potential special offers. The flip side of that is that owing to buoyant bookings your hotel of choice do not not bring prices down and instead actually INCREASE them. They can do this because of the third type of relationship hotels have with booking agencies. There are no contracts, and instead, often via a third-party agent or ‘label’, the hotels are distributed automatically via a GDS (Global Distribution System) and are sold through tens of thousands of travel agencies and websites. The booking arrangement here often involves you paying the hotel on arrival and then the hotel paying the agent a commission after you have completed your stay.

Here, hotels have total control over price and will play with rates to suit themselves. If, for example, for a chosen week the hotel are at 90% occupancy, then they might as that week approaches issue stop sales to all agencies with whom that have a contracted arrangement, and only sell through the GDS increasing the price in the process. In this situation booking late is clearly of no advantage whatsoever.

So where does that leave us? Confused? Well yeah, but there are certain conclusions that can be drawn from all this. Firstly, if you know way in advance the hotel you are looking to stay in, then the advice is to surely book early. Arrange your flights, book you hotel and relax. At the very least you probably will have benefited from an early booking discount. Perhaps the price will fall closer to the time, but equally there is scope for it to increase. Play it safe and book it.

If however you have no specific plans, and have no particular preference for where you end up, except maybe for the country and class of hotel; then leaving it late will almost certainly pay dividends – particularly for package holidays. Take that chance and save yourself some pennies.

As for the rest of us, well you take your chances. It’s most certainly true that in a large city destinations there will always be bargain last minute deals available as hotels look to fill empty rooms. Set your sights on a particular hotel however then waiting until the last minute could be costly.

What we can say with absolute certainty is that when you do choose to book, you always use a hotel price comparison site such as hotelpricescanner.com; but then you knew I was going to say that, didn’t you?

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Comments

Excellent article! Not sure that I am any clearer at the end of it though. I did make the mistake once of waiting to the last minute to book a hotel I really wanted to stay at and prices did seem to go up as time went on and it sold out! I always book early now.

[…] on a last-minute special discount. So we often wonder, why is the price constantly changing?The referenced article describes this hotel-booking agencies-traveler’s trading network in detail, which closely […]

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About Hotel Price Scanner

The Hotel Price Scanner is the world's leading hotel price comparison service. We are 100% independent and have no direct relationship with any hotels or booking providers. Our service offers not only price information, but also hotel reviews, descriptions and millions of hi-resolution images. Our search engine queries more than 200,000 hotels in thousands of destinations in approaching 200 countries worldwide and we guarantee to find you the cheapest rates!